Douglas Steele, the director of operations
for the American Diner Company in Moscow, which has nine restaurants serving
American diner-style food and has been in the market 16 years, said that while
shortages are not an issue yet, the company is preparing for them.

"Imported products account for 20 percent of our menu listings,” Steele
said. “We are re-working our menu at the moment to reflect the import
sanctions. We are particularly affected by menu items that include various
cheeses - our bacon blue burger (blue cheese) for example, our Greek salad
(feta), our Caesar, which features Grana Padano, our American cheddar, and
quality bacon for our burgers. Salmon will be an issue. We have not seen a
deficit yet, however, we have seen a dramatic price increase – some as high as
50 percent – for some items from our suppliers. We will be changing our menu next week that will reflect
product availability and cost of same."

Last
year Russia imported about $1.3 billion in food and agricultural products. More
than 60 percent of fresh and frozen beef sold in Russia is imported along with
50 percent of fish and seafood, 48 percent of cheese and 45 percent of nuts and
fruit, according to reporting from Russian business daily Vedomosti.

Alexander Proshenkov, chef of the high-end
American import Saxon+Parole, which opened its first branch outside of New York
last year, said that his restaurant imports between 70 and 75 percent of the
food it sells.

“Almost all
greens, vegetables, partially seafood and fish, and all oysters come from
Europe. We get scallops from the U.S. We'll have to correct the menu. Hopefully we won't experience
any losses as everyone is in the same situation, but it's obvious that the
prices will grow and the business marginality will go down. We'll have to
remove some items from the menu since it's unrealistic to replace them.
For example, we'll have to remove the scallops because the Chinese alternative
is much worse in quality,” Proshekov said.

Pavel Kosterenko, the co-founder of the
Friends Forever Co., which has seven restaurants in Moscow, said that coping
with previous bans prepared him for making the adjustments that are necessary
now. "We used American meat, until it was banned [in February 2013] and
actually no one noticed. We used American peanut paste and marshmallows for
cacao.”

Although Kosterenko’s restaurants
specialize in what he calls “American comfort food,” very few of his suppliers
work with American goods, and his experience is not unusual. Russia makes up
less than 1 percent of all U.S. agricultural exports. The most notable American
food export to Russia is chicken. More than $300 million worth of U.S. chicken
was sold to Russia in 2013, according to Reuters.

Kosterenko, like others, is mostly
concerned with finding new sources for products coming from Europe. “The import
from Europe is very big,” Kostarenko said. “It's berries, cheese, meat, butter,
coffee.”

Saxon+Parole’s Proshenkov is concerned
about the supplies of greens and seafood. “Now we experience irregular supply of salads, mini
romano, for example, and European oysters are almost out. The cheeses won't
last long. You surely can feel the general hysteria, but it's a question
of time, I'm sure that it's possible to find alternatives for most products. The biggest problem is European
cheeses and meat. The prices will surely go up, but hopefully it won't be that
bad. One of our biggest challenges now is to keep the pricing policy of
our restaurant and not allow the rise in prices. But unfortunately, very little
depends on us now."

Kosterenko also expressed frustration at
his lack of control over the situation. “I'd be gladly buying berries from
Russia. We are completely dependent on our suppliers. It's up to them whether
the berries will be from the Netherlands or Krasnodar. Our suppliers value our
contractual relationships and no one thinks of making money out of it. We're
all in the same boat and everyone understands it. If our suppliers ask us to
pay a month in advance, we do it,” Kosterenko said.

Proshenkov also trusts that his suppliers
will meet the demand of his customers. “You surely can feel the general hysteria,
but it's a question of time, I'm sure that it's possible to find alternatives
for most products,” Proshenkov said.

Expats, however, whose only source of
foreign food imports is their suitcases and their friends, are already resigned
to being without some of their favorite items.

Pete, a Moscow DJ, said he would miss
marbled beef the most. "Cheese is already off the shelves, prices gone up.
These food sanctions are the dumbest thing I've ever seen. Went to [local
steakhouse] Torro Grill for dinner last night. They were out of fish and had no
idea when they would get more," he said.

Nick, a financial analyst, is worried about
his emptying Nutella container. "I'm afraid I'll no longer be seeing
Nutella at [high-end grocery] Azbuka Vkusa, which is going to be terrible.
Honestly, I'm not sure what's going to happen to Azbuka Vkusa in general since
everything there is imported, but I'm curious to find out. I have not noticed any hikes in
prices yet, but I do expect it to happen soon. I eat at Italian restaurants two
or three times a week, and cheese from Italy is mostly forbidden as far as I
understand. I expect prices in Italian restaurants to go up here in
Moscow."

Luzia, a journalism intern, has already
noticed price hikes, however. "So far we still can buy stuff. I had just
some imported cheese for breakfast. But prices are rising though. The Italian
coffee I bought yesterday just doubled,” she said, adding that she wasn’t sure
if the price increases were due to availability or unscrupulous suppliers.

Analysts agree that consumers in Russia will
be the ones most affected by the sanctions.

A week after the sanctions were announced,
Goldman Sachs analyst Michael Cahill and economist David Mericle wrote in a
research note "While sanctions are likely to have a larger impact on the
Russian economy, the effect on the euro area economy is likely to be more
modest, and the effect on the U.S. economy is likely to be smaller still."

Oleg Bucklemishev, director of the Economic
Policy Research Center at Moscow State University called the Russian government’s
approach “very Soviet,” and said that Russia will suffer the most from the
sanctions.

"It's going to bring an unavoidable increase
in prices while quality goes down – less supply, same demand. We're at loss
again. Think of importers and restaurant businesses: switching to new markets
and products isn't that easy - some may be ruined. There are also niches where
banned products are simply irreplaceable, like in cases of those who have certain
diseases that require special nutrition. Additionally, Western partners from
all sectors, not just sanctioned ones, will be more demanding towards Russian
clients, and may ask for 100 percent pre-payment or use a residual approach,”
Bucklemishev said. "We won't punish anyone and won't achieve anything.
Competition is the best environment for the development of our manufacturing.
Eliminating the competition never brought positive results."